Pan India cement manufacturer UltraTech Cement Ltd saw its domestic cement sales volumes grow 32% year-on-year (y-o-y)to 17.64 million tonnes (mt) in the March quarter. But we needn’t read too much into that, because volumes have been boosted by acquisitions. ACC Ltd too saw healthy volume growth in its key markets in the same quarter.

In any case, everybody expected cement makers to report decent volume growth, but what’s encouraging is the improvement in realizations. UltraTech said it has seen its realizations improve 5% during the quarter.

There is, of course, a fly in the ointment. Operating costs are surging at a rapid pace, due to the rise in petroleum coke (petcoke) and coal prices and the ban on petcoke usage in thermal power plants. Petcoke prices increased as much as 20% during the quarter to $104/tonne, the company said.

Consequently, on a per tonne basis, its energy cost jumped 17% y-o-y to Rs987. That is no mean jump. Logistic costs too continued to head northwards.

Of course, the company is not sitting on its hands and no doubt it’s doing all it can to improve efficiency, thereby mitigating the impact of elevated costs. Towards that end, they’ve gone in for increased usage of low-cost fuel and alternate additives. But despite their best efforts, the improvement in realizations is unlikely to offset the cost pressures.

What of the stock? Year to date, the company’s shares have under-performed the broader market. The stock did see a sharp uptick last week after the company announced the commissioning of a greenfield clinker unit with a capacity of 2.5 million tonne per annum capacity (mtpa) at Manawar, in the Dhar district of Madhya Pradesh. This new plant will provide a strategic advantage to the company for serving the growing cement demand from Madhya Pradesh’s main industrial belt—the Dewas-Ratlam-Pithampur-lndore sector, the company said in a press release.

But that hasn’t been enough to support the stock, with the rally fizzling out. On Wednesday, the stock was under pressure ahead of the earnings announcement and while it did swing to the green after the results came out, it ended the day in the red.

The company’s financials for the March quarter are not comparable with the year ago period, simply because the results include the output from cement plants acquired from Jaiprakash Associates and Jaypee Cement in the last one year.

The company’s standalone net profit stood at Rs488 crore for the March quarter, not up to Street expectations. Profit was hit by a one-time provision for stamp duty of Rs266 crore and Rs41 crore for deferred tax due to changes in tax rates. On a consolidated basis, the company’s profit came in at Rs724 crore.

It goes without saying that we need to closely watch the trend in realizations and operating costs. More interestingly, the stock will be in the news for the twists and turns in UltraTech’s ongoing tussle with Dalmia Bharat Ltd for the acquisition of Binani Cement.